The year 2016 is not expected to be a good one for the total memory market and the main culprit is DRAM, according to IC Insights. Declining shipments of desktop and notebook computers, the biggest users of DRAM, as well as declining tablet shipments and slowing growth of smartphone units have created excess inventory and suppliers have been forced to greatly reduce ASPs in order to move parts.

A fall of 16% in DRAM ASPs coupled with a forecast 3% decline in unit shipments is expected to result in the market declining 19% in 2016, the lowest among the 33 IC product categories IC Insights, according to the research firm. This steep decline will be a drag on growth for the total memory market (-11%) and for the total IC market (-2%) in 2016.

Big swings in ASP are not new to the DRAM market. Annual DRAM ASP increases of 48% and 26% in 2013 and 2014 propelled the DRAM market to more than 30% growth each year. In fact, the DRAM market was the strongest growing IC product segment in each of those years. Then, market share grabs and excess inventory started the cycle of steep price cuts in the second half of 2015 and that continued through the first half of 2016, IC Insights said.

DRAM ASP growth has taken several dramatic upward and downward turns since 2007, confirming the volatility of this IC market segment, IC Insights indicated. When coupled with strength or weakness in DRAM unit shipments, bit volume demand, and the amount of capacity and capital spending dedicated to DRAM production each year, this market can turn quickly up or down.

On a positive note, DRAM ASPs strengthened in late second-quarter 2016 and are forecast to continue growing through the balance of 2016 and into 2017, IC Insights said. The boost to DRAM ASP is expected to come from demand for enterprise (server) systems, which have been selling well due to the need to process "big data" (e.g., the Cloud and the Internet of Things). Also, low-voltage DRAM continues to enjoy solid demand for use in mobile platforms, particularly smartphones. Demand from new smartphone models is expected to help contribute to increasing DRAM ASPs through the end of 2016 and into 2017, IC Insights noted.

The upward DRAM ASP trend may be short lived, however, as two China-based companies, Sino King Technology in Hefei and Fujian Jin Hua IC Company, plan to enter the DRAM marketplace beginning in late 2017 or early 2018. It remains to be seen what devices and what technology the two new entrants will offer but their presence in the market could signal that another round of price declines is around the corner, IC Insights said.